Should I be wary of a franchisor offering a discount on the initial investment if I agree to become a franchisee within a certain time frame?

The short answer is “yes”!

Entering into a franchise agreement is not something that you should ever rush and franchisors should never put franchisees under pressure to take a franchise.  All prospective franchisees should be aware of “danger signals” and one of those is where a franchisor tries to put pressure on a prospective franchisee to sign the franchise agreement quickly either because a training session is about to start, another prospect is interested in the same area or a discount would be available.

If you enter into a franchise you will be devoting substantial financial resources and also a great deal of your life to making a success of your franchise business.  If your prospective franchisor really thinks that by making a “money off” offer, as if the franchisor was selling baked beans is the way to “sell” its franchise, then that franchisor really hasn’t understood what franchising is about.

Instead, what you need to do is investigate the franchise and any competing franchises very carefully, establish that the franchisor has a good reputation and a successful network of franchisees and persuade yourself that the initial fee being charged by the franchisor does not contain any or a substantial profit element for the franchisor – its purpose is simply to reimburse the franchisor the very substantial costs that it is likely to incur in recruiting franchisees.  If there is a profit element – and if the franchisor is prepared to offer a discount, then it probably means that there is a profit element – then there is a significant danger that the franchisor’s business model is selling franchises at a profit rather than, as it should be, ensuring that franchisees have profitable businesses.  You have been warned!